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Remote deposit capture hits industry fast track

In one year, remote deposit capture has enhanced software solutions and broadened industry-use.

October 9, 2006

WhenThe Check Clearing for the 21st Century Acttook effect in 2004, a new door opened for deposit-capture solutions.

Since the creation of remote deposit capture 18 months ago, financial institutions have been slow to adopt the technology. Over the last year, RDC has picked up speed, with more RDC solutions entering the market in late 2004 and early 2005. Now those solutions are getting noticed.

In his report, "Remote Deposit Capture Vendors: Crossing the Chasm," Bob Meara, an analyst for Boston-based consultancy Celent LLC, analyzes 11 vendors in four categories - advanced technology, breadth of functionality, customer base and depth of client services. (Vendors were: Alogent Corp., BankServ, Carreker Corp., Goldleaf Financial Systems, NetDeposit, Metavante Image Solutions, Open Solutions,ProfitStars, RDM Corp., Vicor andWausau.)

Meara found that no single vendor topped the list in all four categories. And it's too early to say who the long-term winners will be, he said.

A change in focus

The pace of change surrounding the market also is a factor, he said, and it's not expected to slow anytime soon.

RDC has allowed FIs to focus on new-customer relationships and money-saving initiatives. The electronic truncation of checks also has helped FIs reduce transportation costs and delays, create more efficient atmospheres, and accelerate clearing, Meara says in his report.

In the past, banks used distributed capture as a way to electronically clear checks in bank branches, at cash vaults and at the ATM; but the technology could not help an FI grow its deposit business.

RDC works in much the same way as distributed capture, but the main difference is it can grow an FI's deposit business. RDC enables an FI to gain additional deposit business from existing clients and new deposit-services business.

"In each case, the business is won because RDC eliminates the geographic constraints that have historically driven check deposits," Meara said. "Banks are quick to adopt this because they fear if they don't, they'll lose depositors to competitors, large and small."

A sea of change

RDC solutions have changed dramatically since their introduction 18 months ago, Meara said. But with the technology comes a new set of concerns, especially in the area of fraud detection.

"The whole idea of imaging invites potentially new fraud mechanisms or the redesign of banks' fraud-detection capabilities," he said. "On the other side, as the industry matures and more is done electronically, the opportunity for catching fraud more quickly is reasonable now. There's a variety of checks in place that I think are making fraud not a particular problem."

What's Important FIs could face long-term problems if they don't implement RDC solutions in the future. Vendors are creating sales and marketing alliances with some FIs to offer RDC solutions to core banking customers. RDC solutions give FIs the ability to build their deposit businesses by eliminating geographic boundaries.

During his research, Meara found several surprises - including the number of new software solutions on the market, the number of RDC-solution providers entering the space, and the rate at which the technology is being deployed.

"In terms of the solutions themselves, while there are clear differences, they are much more similar now than a year ago," he said. "Banks and service providers are moving from check-only remote deposit to integrating not only checks with item processing, but remittance coupons or payment coupons, invoices and purchase orders."

In terms of rollout rate, the days of FIs cautiously reviewing RDC solutions needs to come to an end, especially if those FIs expect to stay competitive, Meara said.

According to Meara's report, RDC vendors have begun to form sales and marketing alliances with FIs. For example, Digital Insight offers RDC to its installed base of business Internet banking institutions through a partnership with BankServ. And Fiserv ITI is offering RDC to its core-banking customers through a partnership with Alogent.

Long-term, FIs that don't consider RDC solutions or partnerships will be shut out, Meara said. Another threat is the slow pace of implementation. Of the top 100 banks in the United States, only 60 have moved toward RDC. Of those, Meara said, many have small deployments.

"That dynamic is allowing many banks to be slow and cautious because they haven't seen competitive activity impact their bottom line; but it's going to happen," he said. "When it does, fur is going to fly, and it's going to be fun to watch."

Read also,Check 21 implementation finds its stride